Herrington, Pamela v. Waterstone Mortgage Corporation

Filing 92

ORDER denying 82 Motion to Reopen Case ; denying 83 Motion for Reconsideration. Signed by District Judge Barbara B. Crabb on 1/28/14. (rep)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - PAMELA HERRINGTON,
individually and on behalf of all
others similarly situated,
OPINION AND ORDER
Plaintiff,
11-cv-779-bbc
v.
WATERSTONE MORTGAGE CORPORATION,
Defendant.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - In 2011, plaintiff Pamela Herrington filed this proposed class action under the Fair
Labor Standards Act and state law, alleging that defendant Waterstone Mortgage
Corporation failed to pay its loan officers for overtime work. In an order dated March 16,
2012, dkt. #57, I concluded that plaintiff’s claims would have to be resolved through
arbitration under an agreement between the parties. However, in accordance with In re D.R.
Horton, Inc., 357 NLRB No. 184 (2012), available at 2012 WL 36274, I also concluded
that the National Labor Relations Act gave plaintiff the right to join other employees to her
claims, despite a provision in the arbitration agreement to the contrary. I closed the case
administratively to allow the parties to proceed with arbitration.
Now before the court is defendant’s fourth request to reopen the case since I sent it
to arbitration. The first time defendant challenged a decision by the arbitrator that the

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arbitration agreement permits class arbitration, dkt. #61; the second time defendant
challenged the arbitrator’s order limiting communication with potential class members, dkt.
#64; the third time defendant challenged an interim award of attorney fees, dkt. #74. I
denied the first two requests because they were premature and because defendant failed to
show that it was entitled to relief on the merits under the applicable standard of review.
Dkt. #72. Defendant withdrew its third request the day after plaintiff filed her opposition
brief. Dkt. #80.
In defendant’s fourth and most recent request, it asks this court to reconsider the
portion of the March 16, 2012 decision in which I concluded that “plaintiff must be allowed
to join other employees to her case.” Dkt. #57 at 18. Defendant relies primarily on D.R.
Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013), which overturned the decision of the
National Labor Relations Board. It seeks relief under Fed. R. Civ. P. 60(b)(6), which allows
a court to vacate a final judgment or order for “any other reason that justifies relief.”
After considering the standard of review for a motion brought under Rule 60(b)(6)
and the reasoning of the Court of Appeals for the Fifth Circuit and the other cases defendant
cites, I am declining to vacate the March 2012 order. Although I acknowledge that the
weight of authority developed since that order favors defendant’s view, I am not persuaded
that the answer is so clear as to justify the relief that defendant seeks. It may be that
ultimately the Supreme Court or the Court of Appeals for the Seventh Circuit will agree with
defendant, but until that time, I will adhere to the decision of the board.

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OPINION
As it did in some of its other motions to reopen, defendant initially ignored a
threshold question, which is whether this court even has jurisdiction to reconsider a previous
order while a case is proceeding in arbitration, almost two years after the court issued the
order defendant is challenging. In her opposition brief, plaintiff cites various cases for the
general proposition that only one tribunal may have jurisdiction over the same proceeding
at one time. Patterson v. Wendel, 983 F.2d 1073 (7th Cir. 1992); Shevlin v. Schewe, 809
F.2d 447, 451 (7th Cir. 1987); United States v. One 1979 Rolls-Royce Corniche
Convertible, 770 F.2d 713, 716 (7th Cir. 1985); Canterbery v. Petrovich, 07 Civ.
0584-MJR, 2008 WL 63263, *3 (S.D. Ill. Jan. 3, 2008). However, none of these cases
involved an arbitration proceeding, much less raised the specific question whether a district
court has authority to reconsider its own decisions while a related arbitration is pending. In
its reply brief, defendant cites various cases for the proposition that arbitrability is a question
for the court, e.g., Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002), but that
argument is a non sequitur. There is no dispute that district courts may decide in the first
instance whether an arbitration clause is valid; the question is whether a district court may
reconsider that decision while the case is proceeding in arbitration.
Defendant also cites Nielsen v. Piper, Jaffray & Hopwood, Inc., 66 F.3d 145, 147
(7th Cir. 1995), which is closer to the mark. In Nielsen, the district court had granted a
motion to reconsider an order compelling arbitration, even though the motion was filed
approximately nine months after the court issued the order. However, Nielsen provides

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limited guidance because no party challenged the district court’s authority to reconsider its
decision and the court of appeals did not state whether the arbitration proceedings had
begun at the time the motion for reconsideration was filed. In my own research, I uncovered
University Life Insurance Co. of America v. Unimarc Ltd., 699 F.2d 846, 850 (7th Cir.
1983), in which the court stated in dicta that, “[i]f [the district court] had ordered
arbitration, and left it at that, it would still be open to the parties—as it would be to the
parties to any completed litigation—to go back to [it] for interpretation or modification of
an order, the order to arbitrate, having an ongoing effect.” This statement suggests that a
motion for reconsideration of an order regarding arbitrability should be treated like any
other motion brought under Fed. R. Civ. P. 60, at least while the order has “an ongoing
effect.” (Another aspect of University Life Insurance was superseded by 9 U.S.C. § 16(b),
as noted in Amgen, Inc. v. Kidney Center of Delaware County, Ltd., 95 F.3d 562, 565 (7th
Cir. 1996), but that aspect is not relevant to the quoted language.)
Even if I assume that I have jurisdiction to consider defendant’s motion, defendant
has not shown that “extraordinary circumstances” exist to justify a grant of relief under Rule
60(b)(6). Arrieta v. Battaglia, 461 F.3d 861, 865 (7th Cir. 2006). Defendant’s sole reason
for seeking relief is new case law supporting a view that employees cannot rely on the NLRA
to invalidate arbitration provisions that prohibit joint litigation. However, as the Court of
Appeals for the Seventh Circuit recently reaffirmed, “a change in law showing that a previous
judgment may have been incorrect is not an ‘extraordinary circumstance’ justifying relief
under Rule 60(b)(6).” Nash v. Hepp, — F.3d —, 12-1786, 2014 WL 187107 (7th Cir. Jan.

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17, 2014). In its reply brief, defendant argues that the general rule does not apply because
most motions brought under Rule 60 involve situations in which the case is no longer
pending in any forum. Although that argument has some force, defendant cites no authority
to support it. Further, as plaintiff points out, the decision of the Court of Appeals of the
Fifth Circuit is neither final (because it could be overturned en banc or by the Supreme
Court) nor binding (because neither this court nor the National Labor Relations Board is
bound to follow the Court of Appeals for the Fifth Circuit. Nielsen Lithographing Co. v.
NLRB, 854 F.2d 1063, 1066 (7th Cir. 1988)). Under these circumstances, it would be
premature to grant defendant’s requested relief.
Finally, I am not persuaded that the board’s decision is incorrect. The reasoning
followed by the board is straightforward: (1) under the NLRA, “[e]mployees shall have the
right to . . . engage in . . . concerted activities for the purpose of . . . mutual aid or
protection,” 29 U.S.C. § 157, and employers may not “interfere with, restrain, or coerce
employees in the exercise of” that right, 29 U.S.C. § 158(a)(1); (2) both courts and the
board have found consistently that lawsuits for unpaid wages brought by multiple plaintiffs
may be one type of “concerted activity” protected by §§ 157 and 158(a)(1); (3) an employer
interferes with an employee’s right to engage in concerted activities by requiring her to sign
an agreement that includes a prohibition on collective actions by employees; (4) there is no
conflict between the Federal Arbitration Act and the NLRA because the Federal Arbitration
Act does not require the enforcement of arbitration agreements that conflict with substantive
provisions of federal law. In re D.R. Horton, Inc., 357 NLRB No. 184 (2012), available at

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2012 WL 36274.
On appeal, the Court of Appeals for the Fifth Circuit did not explicitly question the
board’s first three conclusions or identify any reason why those conclusions were not entitled
to deference. ABF Freight System, Inc. v. NLRB, 510 U.S. 317, 324 (1994) (board's views
regarding scope of NLRA are entitled to "the greatest deference"); Sure-Tan, Inc. v. NLRB,
467 U.S.883, 891 (1984) (interpretations of NLRA by board will be upheld if "reasonably
defensible") (internal citation omitted). See also Delock v. Securitas Security Services USA,
Inc., 883 F. Supp. 2d 784, 789 (E.D. Ark. 2012) (“When employees band together to assert
FLSA claims, the Board concluded in Horton, they are pursuing concerted activities for
mutual aid and protection, which the NLRA protects. This conclusion is a reasonable reading
of the statute. . . . The Court therefore defers and follows the Board's reading on this point.”)
(citations omitted). Instead, the court of appeals seemed to take issue with the board’s
conclusion regarding the absence of a conflict between the FAA and the NLRA.
First, the court of appeals seemed to question whether §§ 157 and 158(a)(1) create
rights that could overcome a class action waiver. The court of appeals did not challenge the
general rule that the FAA does not require the enforcement of an arbitration agreement that
violates a substantive federal right. 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 273 (2009)
(“[A] substantive waiver of federally protected civil rights will not be upheld.”); Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985) (“By agreeing to
arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the
statute.”); Stawski Distribution Co., Inc. v. Browary Zywiec S.A., 349 F.3d 1023, 1025 (7th

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Cir. 2003) (“[S]ubstantive rights are not subject to waiver.”); Cange v. Stotler & Co., Inc.,
826 F.2d 581, 595 n.11 (7th Cir. 1987) (“[A]n arbitration clause which operated as a
prospective waiver of a substantive statutory right could violate public policy and be
unenforceable.”). See also Alexander v. Gardner-Denver Co., 415 U.S. 36, 51 (1974)
("[T]here can be no prospective waiver of an employee's rights under Title VII."). However,
the court seemed to question whether a “substantive” right was at issue, noting that the
Supreme Court has concluded that the right to proceed as a class under Fed. R. Civ. P. 23
or 29 U.S.C. § 216(b) is a procedural rather than a substantive right. D.R. Horton, Inc. v.
N.L.R.B., 737 F.3d 344, 357 (5th Cir. 2013) (citing Amchem Products, Inc. v. Windsor,
521 U.S. 591, 612–13 (1997); Deposit Guaranty National Bank v. Roper, 445 U.S. 326,
332 (1980)). At the same time, the court acknowledged the distinction the board made
between the NLRA and Fed. R. Civ. P. 23 or 29 U.S.C. § 216(b). In particular, the board
wrote:
Any contention that the Section 7 right to bring a class or collective action is
merely "procedural" must fail. The right to engage in collective
action—including collective legal action—is the core substantive right
protected by the NLRA and is the foundation on which the Act and Federal
labor policy rest. . . . Rule 23 may be a procedural rule, but the Section 7 right
to act concertedly by invoking Rule 23, Section 216(b), or other legal
procedures is not.
D.R. Horton, 2012 WL 36274, at *12 (internal citations omitted). Thus, it is not clear how
§§ 157 and 158(a)(1) can be distinguished from any other substantive right in the
employment context, such as the right to be paid a minimum wage or to be free from certain
types of discrimination. Although the court of appeals acknowledged the board’s reasoning,

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the court did not challenge it, instead restating the point that the right to litigate as a class
has been treated as a procedural right in other contexts.
Second, the court of appeals stated that “[t]here is no argument that the NLRA's text
contains explicit language of a congressional intent to override the FAA.” D.R. Horton, 737
F.3d at 360. However, the court did not explain why it was necessary to locate language or
congressional intent to “override the FAA.” Again, it is well established that an arbitration
agreement may not require a party to waive a substantive federal right. In concluding that
the NLRA did not include language supporting the board’s position, the court of appeals
failed to consider the very provisions on which the board relied, 29 U.S.C. §§ 157 and
158(a)(1), which prohibit an employer from interfering with an employee’s right to engage
in concerted activities to improve working conditions. I see no basis for distinguishing these
provisions from others that courts have found cannot be waived in an arbitration agreement.
E.g., Kristian v. Comcast Corp., 446 F.3d 25, 47–48 (1st Cir. 2006) (finding provision of
arbitration agreements barring the recovery of treble damages in an antitrust case invalid
because it prevented the vindication of a federal statutory right); Hadnot v. Bay, Ltd., 344
F.3d 474, 478 n. 14 (5th Cir. 2003) (finding agreement waiving punitive and exemplary
damages in a Title VII case unenforceable).
Third, the court of appeals stated that “there is no private cause of action against
employers to prevent and remedy unfair labor practices under the NLRA; enforcement is left,
instead, to the Board.” D.R. Horton, 737 F.3d at 360 n.9. However, the court did not
explain the relevance of this observation. Again, the question is whether the arbitration

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agreement requires the employee to waive a substantive right. The court of appeals did not
cite any authority for the proposition that the parties to an arbitration agreement are free
to violate federal rights that are not accompanied by a private right of action. In this case,
plaintiff’s federal claim is brought under the FLSA; she relies on the NLRA, not to provide
a cause of action, but essentially as a defense to defendant’s attempt to enforce a provision
of the arbitration agreement. The Supreme Court already has held that “[w]hile only the
Board may provide affirmative remedies for unfair labor practices, a court may not enforce
a contract provision which violates” the NLRA. Kaiser Steel Corp. v. Mullins, 455 U.S. 72,
86 (1982). See also Jasso v. Money Mart Express, Inc., 879 F. Supp. 2d 1038, 1047 (N.D.
Cal. 2012) (rejecting argument that absence of private right of action in NLRA provides
grounds for refusing to invalidate contract that violates NLRA).
Fourth, the court of appeals noted “that the NLRA was enacted and reenacted prior
to the advent in 1966 of modern class action practice,” meaning that, under the board’s
ruling, “the NLRA would have to be protecting a right of access to a procedure that did not
exist when the NLRA was (re)enacted.”

D.R. Horton, 737 F.3d at 362.

Again, the

significance of this observation is not apparent. There are many situations that fall within
the scope of a law, but were not necessarily anticipated at the time the law was passed. For
example, video games and thermal imaging did not exist at the time the First Amendment
and Fourth Amendment were enacted, but that has not stopped the Supreme Court from
applying those amendments to either situation.

Brown v. Entertainment Merchants

Association, — U.S. — , 131 S. Ct. 2729, 2733 (2011); Kyllo v. United States, 533 U.S. 27

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(2001).
“[S]tatutory prohibitions often go beyond the principal evil to cover reasonably
comparable evils, and it is ultimately the provisions of our laws rather than the principal
concerns of our legislators by which we are governed.” Oncale v. Sundowner Offshore
Services, Inc., 523 U.S. 75, 79 (1998). In other words, the question should be what the
plain language of the statute covers, not when the activity at issue first arose. Again, the
court of appeals did not directly challenge the board’s construction of the NLRA as
encompassing the right for employees to file class actions, much less cite any authority for
the proposition that the board’s interpretation was unreasonable because it included a
“concerted activity” that postdated the NLRA’s enactment.
Fifth, the court of appeals relied heavily on AT&T Mobility LLC v. Concepcion,131
S.Ct. 1740, 1746 (2011), in which the Supreme Court concluded that the FAA preempted
a state law that prohibited class action waivers. Although the Court did not point to any
textual conflict between the FAA and the state law, it stated that “[r]equiring the availability
of classwide arbitration interferes with fundamental attributes of arbitration and thus creates
a scheme inconsistent with the FAA.” Id. at 1748.
To be sure, Concepcion and the board’s decision in Horton point in different
directions. However, the board distinguished Concepcion on the ground that it did not
involve the waiver of a substantive federal right. I accepted this distinction in the March
2012 order and defendant has not identified any new grounds for changing that view.
Finally, the court of appeals stated that “[e]very one of our sister circuits to consider

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the issue has either suggested or expressly stated that they would not defer to the NLRB's
rationale, and held arbitration agreements containing class waivers enforceable.” D.R.
Horton, 737 F.3d at 362 (citing Richards v. Ernst & Young, LLP, 734 F.3d 871, 873–74
(9th Cir. 2013); Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297–98 n.8 (2d Cir.
2013); Owen v. Bristol Care, Inc., 702 F.3d 1050, 1055 (8th Cir. 2013)). However, that
statement is a little misleading. In Richards, the Court of Appeals for the Ninth Circuit
amended its opinion and declined to decide whether to follow the board on the ground that
the plaintiff had forfeited the argument. Richards v. Ernst & Young, LLP, 11-17530, 2013
WL 6405045 (9th Cir. Dec. 9, 2013). Although the other two courts declined to defer to
the board, the Court of Appeals for the Second Circuit did not provide any reasoning for
that decision. Sutherland, 726 F.3d at 297 n.8. The only substantive reason the court gave
in Owen for declining to follow the board was that the arbitration agreement at issue “does
not preclude an employee from filing a complaint with an administrative agency such as the
Department of Labor . . . , the Equal Employment Opportunity Commission, the NLRB, or
any similar administrative body,” and thus does not bar all “concerted action.” Owen, 702
F.3d at 1053-54. However, the court did not explain why a statute that protects “concerted
activities” generally should be construed to permit an employer to determine on its own
which concerted activities are protected and which are not.
In sum, although the Court of Appeals for the Fifth Circuit made a number of valid
points, particularly with respect to Concepcion, I am not persuaded that it requires vacation
of this court’s March 16, 2012 order.

First, the court of appeals’ decision was not

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unanimous. Judge Graves dissented, agreeing with the board’s conclusion that the class
waivers violated the NLRA and that the board’s interpretation of the NLRA did not conflict
with the FAA. D.R. Horton, 737 F.3d at 364-65, (Graves, J., concurring in part and
dissenting in part). Even the majority stated that it did “not deny the force of the Board's
efforts to distinguish the NLRA from all other statutes that have been found to give way to
requirements of arbitration.” Id. at 362. Further, the majority never persuasively rebutted
the board’s conclusion that a collective litigation waiver violates the NLRA and never
explained why, if there is tension between the NLRA and the FAA, it is the FAA that should
trump the NLRA, rather than the reverse. After all, the NLRA includes express language
protecting the rights of employees to engage in concerted action whereas the FAA contains
no language in the FAA prohibiting collective litigation.
Finally, regardless whether the court of appeals was correct about tension between the
FAA and class actions, defendant’s motion for reconsideration overlooks the limited scope
of the March 16, 2012 order. The provision at issue in the parties’ arbitration agreement
does not limit just class actions or collective actions. Rather, it prohibits each employee from
joining her claims with another employee. Dkt. #15-2, § 13, at 6. In the March 2012 order,
I concluded that plaintiff “must be allowed to join other employees to her case,” not that she
must be allowed to certify a class action or a collective action. Dkt. #57 at 18. Because the
concerns raised in Concepcion were about class litigation in particular, not multiple plaintiff
suits generally, any tension between the March 2012 order and Concepcion is limited.
Concepcion, 131 S. Ct. at 1751 (“[T]he switch from bilateral to class arbitration sacrifices

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the principal advantage of arbitration—its informality—and makes the process slower, more
costly, and more likely to generate procedural morass than final judgment.”) (emphasis
added). Although it is true that the arbitrator later ruled that plaintiff must be allowed to
seek class certification (the arbitrator has yet to decide whether to actually certify a class),
that goes beyond the scope of this court’s March 2012 order, which is the only order that
is the subject of defendant’s motion.
Defendant cites the decisions of various district courts that declined to follow the
board, but none of these decisions include reasoning that I have not considered already, so
it is not necessary to discuss these cases separately. Accordingly, I am denying defendant’s
motion for reconsideration.
One final matter deserves mention. This case was filed more than two years ago,
which is longer than it takes for most cases to be resolved in this court, and yet the parties
remain stuck at a preliminary stage of the case. Although I make no comment on the
reasons for the delay, it is clear that the case has been languishing for far too long. I
anticipate that when the parties return to arbitration, they will make every effort to work
with the arbitrator to set a schedule that will allow the remainder of the case to be resolved
expeditiously.

ORDER
IT IS ORDERED that defendant Waterstone Mortgage Corporation’s motions to

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reopen the case and reconsider the court’s March 16, 2012 order, dkt. ##82 and 83, are
DENIED.
Entered this 28th day of January, 2014.
BY THE COURT:
/s/
BARBARA B. CRABB
District Judge

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