September 6, 2013

Another court cries foul on D. R. Horton

By Anastasia P. Boden Attorney

Despite the Supreme Court’s pronouncement that “contract is a matter of consent, not coercion,” and accordingly, contracts must be enforced according to their terms, many courts across the country still show an unwillingness to enforce contracts that contain class action waivers or arbitration provisions.  One of the biggest assaults on the freedom of contract was the National Labor Relations Board’s (NLRB) decision in D. R. Horton, which held that employers may not require class action waivers as a condition of employment, and reasoned that such conditions would violate the employee’s statutory right to engage in collective bargaining under the National Labor Relations Act (NLRA).  The case in on appeal in the Fifth Circuit, and PLF filed an amicus brief in support of reversal.

Fortunately, courts have largely rejected the decision as violative of Supreme Court precedent.  Recently, the Ninth Circuit joined the growing chorus across the country in favor of the freedom of contract in Richards v. Ernst & Young, LLP.  Although the Court held that the plaintiff had waived her D. R. Horton arguments by not bringing them up during briefing, it paused to note that “the only court of appeals, and the overwhelming majority of the district courts” to have considered the case have rejected it.    It also noted the Supreme Court’s recent decision in American Express v. Italian Colors Rest. counsels against accepting the reasoning of D. R. Horton.  That case had affirmed that the NLRA does not override the demands of the Federal Arbitration Act.

While the Fifth Circuit has yet to rule on D. R. Horton, the opinion in Richards and others bode well for the freedom of contract.

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