In the wake of the U.S. Supreme Court's decision against class actions by employees, plaintiffs lawyers are pondering potential next steps. In the words of one: “There's got to be a way around this.”

Plaintiffs lawyers have no hope that Congress will embrace Justice Ruth Bader Ginsburg's call, in her dissent this week, for “urgent” action to reverse the 5-4 ruling in Epic Systems v. Lewis.

But there may be another way: “non-mutual offensive collateral estoppel.”

“It's a mouthful,” said Joseph Sellers of the plaintiffs firm Cohen Milstein Sellers & Toll. “I've spoken with a number of plaintiffs lawyers who expressed interest in it. We're still at the early stage of thinking about it.”

Collateral estoppel limits the relitigation of issues that have been decided by a court. In the workplace arbitration context, “non-mutual offensive collateral estoppel” would work this way, as Sellers put it:

“If we had to litigate cases that would otherwise be a class action, and in the first case we prevail, the ordinary thing to do in the second case with the same issue would be to ask the arbitrator, who is not bound, to find the respondent precluded from relitigating the lawfulness of its defense when it was previously rejected as unlawful. That basically decides the second, third and fourth claims. But if the first claimant loses, the second claimant—who was not a party to that case in the way the employer was—is not bound by the decision.”

Management-side attorneys and their company clients won't like this approach, Sellers said. “The employer could lose the right to assert the same defense in many individual cases thereafter,” he said.

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Arbitrators and Judges Have Broad Discretion

The concept of “non-mutual offensive collateral estoppel” is fairly established in the law, according to some scholars, but it has not been used much. And judges and arbitrators have broad discretion whether to apply it in any given case.

The U.S. Supreme Court addressed non-mutual offensive collateral estoppel in the 1979 decision Parklane Hosiery Co. v. Shore.

The Parklane Hosiery case stemmed from a stockholder class action alleging a false and misleading proxy statement relating to a merger. Shortly after the class action was filed, the U.S. Securities and Exchange Commission sought to enjoin the merger alleging the same misfeasance. The district court in the SEC case found the proxy statement to be false and misleading.

In the class action, Shore moved to prevent Parklane from relitigating the proxy issue. The district court rejected the motion saying it would deprive Parklane of its right to a jury trial. The U.S. Court of Appeals for the Second Circuit disagreed, saying Parklane had a full and fair opportunity to litigate the proxy issue.

The Supreme Court said the jury-trial right does not automatically bar the use of non-mutual offensive collateral estoppel. The justices didn't announce a bright-line rule. Instead, they left judges broad discretion to deny its use when the doctrine would create unfair results.

“It's not my preferred way to do things, but if we're cut off from pursuing common claims in a collective way, it may be another way than litigating the same issue over and over again,” Sellers said.

The approach provides no sure-bet win for plaintiffs. A 2007 ruling in the Ninth Circuit said arbitrators “possess broad discretion to determine when they should apply offensive non-mutual collateral estoppel.” The appeals panel pointed to the Supreme Court's 1979 decision in Parklane Hosiery.

In a 2012 class certification appeal in a disparate impact discrimination case, then-Judge Richard Posner, writing for a Seventh Circuit panel, recognized the availability of the approach. He noted that litigation involving potentially hundreds of suits for backpay “will be more complex if, until issue or claim preclusion sets in, the question whether Merrill Lynch has violated the anti-discrimination statutes must be determined anew in each case.”

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Looking for State and Local Action

State and local laws provide another possible avenue for workers with wage-and-hour and discrimination claims, said employee counsel Davida Perry of New York's Schwartz Perry & Heller.

“Most states have their own human rights law,” Perry said. “We have a [New York] state law, which is not terrific, but a New York City law that is robust and includes punitive damages, attorney fees and uncapped compensatory damages. There may be expansive local and state laws that provide relief.”

Arbitration, Perry said, is still “a viable place” to bring a claim. “I don't turn people away because they signed an arbitration agreement. The Supreme Court decision was a real setback, but we're not going out of business. My phones are still ringing.”

In California, collective claims from employees are permitted under the California Private Attorneys General Act. The California Supreme Court has held that class action waivers don't apply to statutory claims brought under that act.

“What the plaintiffs bar is doing in response is they drop all the class claims so they're not forced into arbitration and all the individual claims and they bring claims on behalf of all workers under the California private attorney general act,” said James Evans Jr., partner at Alston & Bird in Los Angeles. “Most of the money recovered goes to the state so there's no real upside for individual employees. This is really a plaintiff bar-inspired strategy.”

Evans said the logic of the Supreme Court's decision Monday in Epic Systems should apply to the management-side employment bar's ongoing effort to overturn the California Supreme Court decision.

Where estoppel, Congress and state and local laws might fall short, there is the refrain from Ginsburg's dissent—”strength in numbers.” But in a different way, said Cyrus Mehri of Washington's Mehri & Skalet, the civil rights firm.

“I think there are pockets of workers who have more leverage here,” Mehri said. “Law students at elite law schools are asking for transparency from big law firms—whether they have forced arbitration. People who are in demand, like those in tech, if they organize, they can ask for transparency. It's a form of accountability.”

Big companies that are federal contractors were barred from having forced arbitration under an Obama administration executive order, Mehri said. President Donald Trump rescinded it, but another Democratic or moderate Republican president could reinstate it, he added.

“If you're a general counsel to a federal contractor, you can't with certainty feel this landscape has been resolved,” Mehri said. “What are you going to do? Have it in place this year but not for another year? It creates chaos.”

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