A federal district court in Massachusetts effectively gutted a prominent plaintiff’s class action firm’s attempt to avoid arbitration agreements and litigate on a class-wide basis in federal court in Boston. This ruling comes on the heels of a series of class and collective actions filed in federal courts against major U.S.-based and international employers by the Sanford Wittels & Heisler law firm.

In Karp v. CIGNA Healthcare, Inc., the plaintiff-employee was a senior contract manager at CIGNA who asserted discrimination claims in a proposed $100 million putative class action alleging systemic gender discrimination in violation of Title VII of the Civil Rights Act of 1964. Karp’s efforts to represent a class of potentially thousands of current and former female employees were halted when, the district court effectively foreclosed her from proceeding on a class-wide basis either in federal court or in arbitration.

Employer’s Policy Said No Class Arbitration: The plaintiff in Karp acknowledged that she had knowingly agreed to arbitrate any gender discrimination claims she might have. She argued, however, that she never agreed to either any waiver of her class arbitration rights or to the bar on class arbitration contained in CIGNA’s policies and procedures. Relying on the Supreme Court’s decisions in Stolt-Nielson S.A. v. AnimalFeeds Int’l Corp. and AT&T Mobility LLC v. Concepcion, the Court in Karp concluded that because class arbitration must be consensual and because to CIGNA’s policies and procedures “unambiguously” provided that class arbitration was not permitted, the plaintiff could not arbitrate her claims on a class-wide basis. The Court also found that by agreeing toarbitrate her individual claims, the plaintiff could not serve as a class representative in a litigated class action.

Vindication of Statutory Rights - Available in Arbitration: The crux of the decision in Karp hinged on the plaintiff’s argument that forcing her to arbitrate her claims would bar her ability to vindicate her statutory rights under Title VII, and, therefore, the arbitration clause should not be enforced. The plaintiff presented three primary arguments: (1) pattern-or-practice claims are only available in the class-action context, (2) arbitration would not allow her to obtain adequate discovery to prove company-wide discrimination, and (3) certain types of injunctive relief would not be available in arbitration.

The Court fundamentally disagreed with the proposition that the differences in the burdens of proof required for individual and pattern-or-practice discrimination claims constitute a “substantive” issue. The Court explained that a pattern-or-practice claim under Title VII is not a “separate cause of action”, but rather merely a “method of proof” for establishing a Title VII claim. Thus, the plaintiff was not foreclosed from offering evidence in arbitration of a corporate-wide pattern or practice of discrimination to prove that she was the victim of discrimination. In addition, the plaintiff’s ability to obtain certain relief or discovery could be, and should be, addressed by the arbitrator.

The Court’s decision in Karp highlights the importance of drafting and establishing anunambiguous policy regarding no class arbitrations for employment disputes. However, a court in the Southern District of New York (Chen-Oster v. Goldman, Sachs & Co.), faced with a substantially similar issue as the Court in Karp, has determined that even an unambiguous policy prohibiting class arbitrations for employment disputes may be unenforceable. The substantive vs. procedural distinction made by the Courts in Karp and Chen-Oster with respect to “pattern or practice” discrimination claims, will likely be an issue litigated throughout the country in the wake of the Supreme Court’s decisions in Stolt-Nielson and AT&T Mobility – both addressing the viability of class arbitration – and in Dukes v. Wal-Mart – addressing the viability of pattern-or-practice class actions under Title VII.

---