Ohio federal court dismisses class/collective claims and compels arbitration in a recent FLSA class action brought against an insurance company

Enforcing the U.S. Supreme Court's recent decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), the Northern District of Ohio recently dismissed all class/collective claims in an FLSA class action—enforcing the arbitration provisions of the parties’ employment agreement.   This decision is an important victory for employers and for the future of class action waivers for all companies in Ohio and throughout the country. 

In Fitzhugh v. American Income Life Insurance Company, Case No. 1:11-cv-005330-CAB (N.D. Ohio Nov. 3, 2011), a former insurance agent brought a class action complaint against American Income Life Insurance Company ("AIL"), alleging violations of the Fair Labor Standards Act.   Plaintiff alleged that she and others similarly situated were misclassified as independent contractors rather than employees in order to escape the minimum wage and overtime requirements of the FLSA. 

In response, AIL argued that Plaintiff’s employment agreement contained a broadly-worded binding arbitration provision, precluding her from pursuing class claims, as well as from bringing her individual claims in court.  Plaintiff's response was that the arbitration agreement was invalid for a variety of reasons, including that she received no instruction on the arbitration process when she began working, that the jury waiver was unclear and was not supported by sufficient consideration, and that the arbitration clause did not allow effective vindication of her statutory claim. 

Applying Texas law, the Court held that even if Plaintiff did not receive specific instruction on the meaning of the arbitration agreement, she was, as a factual matter, a college graduate and was, as a legal matter, "held to have known what words were used in the contract, to have understood their meaning, and to have comprehended the legal effect of the contract."  (Opinion, at 8.) 

Of most interest, though, is the Court's citation to the Supreme Court's recent decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011).   Plaintiff argued that if the arbitration agreement was upheld, the case should be arbitrated as a class/collective action.  The Northern District of Ohio Court disagreed.  Quoting Concepcion, the Court explained that "[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the [Federal Arbitration Act]."   (Opinion, at 11.)

The Court went on to explain that in Concepcion, the Supreme Court cited Stolt-Nielsen, S.A. v. Animal Feeds Int'l Corp. , 130 S.Ct. 1758 (2010), which involved an arbitration agreement that was silent on the issue of class or collective arbitration.   But in Stolt-Nielsen, the Court held that despite this silence, class arbitration should be disallowed because the "'changes brought by the shift from bilateral arbitration to class-action arbitration' are 'fundamental."  Stolt-Nielsen, 131 S.Ct. at 1776. 

Applying Concepcion and Stolt-Nielsen, the Fitzhugh Court found that—as in Stolt-Nielsen—the arbitration provision at issue was silent on the question of class or collective arbitration.  Thus, Plaintiff's class/collective claims should be dismissed, and the remaining individual claim referred to arbitration.  

Stay tuned for more discussion of cases in Ohio state and federal courts applying Concepcion and discussing the availability of class action waiver in arbitration agreements.

Employment Litigation, Insurance Industry, Ohio Class Action Law