Commercial Litigation and Arbitration

Likelihood of Unnecessary, Duplicative Litigation May Warrant Stay Pending Appeal (American Pipe) — Standards for Stay — Failure to Consent to Expedited Appeal Is a Factor Favoring Stay

From Jock v. Sterling Jewelers, Inc., 738 F. Supp. 2d 445 (S.D.N.Y. 2010):

On August 18, 2010, the above-captioned plaintiffs moved for a stay of the Court's August 6, 2010 Order pending their appeal of that Order. The August 6 Order vacated an arbitrator's June 1, 2009 award, which had permitted the plaintiffs to pursue class certification in the arbitral forum with respect to their claims that defendant Sterling Jewelers, Inc. ("Sterling") discriminated against them in pay and promotion on the basis of their gender in violation of Title VII, 42 U.S.C. § 2000e et seq., and the Equal Pay Act, 29 U.S.C. § 206(d). ***

In evaluating plaintiffs' motion to stay, the Court is guided by the traditional four-factor standard, which considers "(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies." *** As to the first factor, while the Court remains confident in the soundness of the reasons for vacatur set forth in its July 30, 2010 Memorandum Order (reported at Jock v. Sterling Jewelers, Inc., 725 F. Supp. 2d 444, 2010 WL 2898294), there is no doubt that the plaintiffs' appeal presents an issue of first impression that relates to the application of a newly minted rule by a sharply divided Supreme Court in Stolt-Nielsen, S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758, 176 L. Ed. 2d 605 (2010), which reversed the contrary rule that the Second Circuit previously set forth in that case. What is more, the thrust of the appeal arguably rests on factual distinctions between this case and Stolt-Nielsen that were trumpeted by the dissenting Justices as limitations on the majority's holding. See id. at 1783 (Ginsburg, J., dissenting) ("by observing that 'the parties [here] are sophisticated business entities,' and 'that it is customary for the shipper to choose the charter party that is used for a particular shipment,' the Court apparently spares from its affirmative-authorization requirement contracts of adhesion presented on a take-it-or-leave-it basis"). While this Court is still of the view that those asserted distinctions were immaterial, the Court of Appeals may disagree, and for that reason alone the plaintiffs have sufficiently demonstrated a likelihood of success on the merits.

Turning next to irreparable injury, the plaintiffs assert that grave harm would result absent a stay essentially because the August 6 Order, if given final effect, might end the tolling of the statute of limitations as to class claims, see Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538, 554-55, 94 S. Ct. 756, 38 L. Ed. 2d 713 (1974); Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 353-54, 103 S. Ct. 2392, 76 L. Ed. 2d 628 (1983), thus compelling the named plaintiffs and members of the putative class to choose between pursuing their claims in individual arbitrations while the plaintiffs' appeal is pending or else risk losing the possibility of bringing an individual claim if the Court's decision is affirmed. According to the plaintiffs, this Hobson's choice would result in multiple, potentially duplicative proceedings and would entail filing fees and litigation costs that would be prohibitive if they are to be shouldered by claimants on an individual rather than classwide basis. Plaintiffs also assert that individual arbitrations will not permit the development of the panoply of evidence that would be available in a class proceeding, and that the relief available in individual proceedings pales in comparison to what might be granted in a collective action. Finally, they point to the possibility that certain plaintiffs and putative class members, if they elect to bring individual arbitrations pending the appeal and these arbitrations then conclude adversely to them before the appeal is resolved, might be barred from relief even if a class claim were ultimately successful.***

The Court concludes that the plaintiffs have made a sufficient showing on this factor. While it is true that the expenses attendant to litigation and arbitration do not typically amount to irreparable harm, see, e.g., Emery Air Freight Corp. v. Local Union 295, 786 F.2d 93, 100 (2d Cir. 1986), it is similarly clear that irreparable harm may exist "where, but for the grant of equitable relief, there is a substantial chance that upon final resolution of the action the parties cannot be returned to the positions they previously occupied." Brenntag Int'l Chems., Inc. v. Bank of India, 175 F.3d 245, 249-50 (2d Cir. 1999). That circumstance would appear to be present here, where, for example, if an individual plaintiff with a meritorious claim did not pursue an individual arbitration pending appeal because she could not afford the filing fee and other litigation costs, and if the August 6 Order is determined to have restarted the statute of limitations on her claim, then she might be deprived of any right to relief regardless of the appeal's outcome. In any event, courts have held that the likelihood of unnecessary, duplicative litigation can warrant a stay, see, e.g., Woodlawn Cemetery v. Local 365, Cemetery Workers & Greens Attendants Union, 930 F.2d 154, 156 (2d Cir. 1991), and have stayed orders denying class certification based on the prospect of harms similar to what plaintiffs assert here, see, e.g., Nat'l Asbestos Workers Med. Fund v. Philip Morris, Inc., 2000 U.S. Dist. LEXIS 13910, 2000 WL 1424931, at *2 (E.D.N.Y. Sept. 26, 2000) ("Were the statute of limitations period to begin to run before an appeal is taken — or waived — hundreds of thousands of potentially viable claims might expire unless new actions were promptly brought.").

Additionally, the Court finds troubling Sterling's refusal to accede to the plaintiffs' request for an expedited appeal, see Jock v. Sterling Jewelers, Inc., 2d Cir. Dkt. No. 10-3247, D.I. 33. 2 While Sterling is certainly entitled to avail itself of its rights under the Federal Rules of Appellate Procedure, one could draw the inference that Sterling's refusal to expedite its appellate briefing, which will undoubtedly consist primarily of arguments that have already been briefed on numerous occasions both before this Court and before the arbitrator, is motivated largely by tactical considerations. In such circumstances, Sterling's proffer as to the injury that would be occasioned by the stay does not persuade the Court.

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