Morris v. Ernst & Young, LLP

Background

Stephen Morris claimed that Ernst & Young misclassified him as exempt from the Fair Labor Standards Act and California overtime rules during his employment from 2005 to 2007. The case was one of several related cases involving similar claims against Ernst & Young. After the court denied Morris’s effort to join an earlier related proceeding as a class representative or intervenor, he filed this lawsuit.

The parties had agreed to arbitrate disputes. The case was transferred to the Northern District of California, and Ernst & Young moved to compel arbitration. After the United States Supreme Court upheld the arbitration agreement in 2018, the district court ordered Morris to begin arbitration by July 22, 2022. Morris began arbitration on that date and asserted the same federal and California claims.

Ernst & Young moved to dismiss the arbitration claims as untimely. The arbitrator granted that motion. The arbitrator concluded that the applicable statutes of limitation had expired, including because tolling of the California claims ended after the Supreme Court’s 2018 mandate.

Morris’s arguments

Morris moved to vacate, or overturn, the arbitration award. He argued that the agreement was silent about when arbitration had to begin, that filing by the court-ordered July 22, 2022 deadline made the claims timely, and that the arbitrator ignored the agreement’s choice-of-law provisions.

Morris also argued that the arbitrator reached an irrational result by applying the Federal Arbitration Act rather than New York law, and that the arbitrator failed to account for the agreement’s requirement that mediation occur before arbitration.

Court’s analysis

The court explained that the Federal Arbitration Act permits a federal court to vacate an arbitration award only on limited grounds, including when arbitrators exceed their powers. Under the standard applied by the court, an arbitrator exceeds those powers when the decision is completely irrational or shows a manifest disregard of the law, rather than merely because the arbitrator may have interpreted or applied the law incorrectly.

The court held that the arbitrator’s conclusion about when arbitration had to begin was not irrational. The court also stated that its prior order setting a July 22, 2022 arbitration deadline did not decide that claims filed by that date would necessarily be timely.

The court rejected Morris’s choice-of-law argument. It found that the agreement’s provision applying New York law when the Federal Arbitration Act did not apply was not triggered because the Supreme Court had determined that the agreement was governed by the Federal Arbitration Act. The agreement separately required the arbitrator to apply the substantive law that a court in the arbitration venue would apply. The court concluded that this meant California law applied to the California claim and federal Fair Labor Standards Act law applied to the federal claim.

The court also held that the arbitrator reasonably concluded that the statutes of limitation had expired. Morris stopped working for Ernst & Young in February 2007. The court stated that the four-year statute of limitation for his California claims would ordinarily have required filing by February 2011, and that it was not irrational for the arbitrator to conclude that tolling ended in June 2018 and the claims expired before arbitration began.

Finally, the court found that the arbitrator had not ignored the mediation provision. The arbitrator determined that the provision did not affect whether the statutes of limitation had expired, and Morris had not argued that Ernst & Young waived its statute-of-limitations defense by participating in mediation.

Disposition

Judge White denied Morris’s motion to vacate the arbitration award. In light of that ruling, the court dismissed the case, entered judgment, directed the clerk to close the file, and dated the order July 22, 2024.