South Carolina Court Enforces Class Action Waiver Provision and Compels Arbitration

Brumfield v. Kindred Healthcare, Inc. is a putative collective action brought under the Fair Labor Standards Act by home health licensed nurses and physical therapist assistants alleging defendants failed to pay them overtime for required work activities beyond the “in-home” visits, including travel time, time spent transporting samples to labs, and time spent delivering medical supplies to patients. Four additional people elected to “opt-in” to the case and join the collective action, including Andrew Tyler, who worked in South Carolina.

Defendant Kindred Healthcare filed a Motion to Transfer Venue, or in the alternative, a Motion to Compel Arbitration, Strike Collective Claims, Dismiss, and Transfer on April 24, 2018. Defendants’ primary goal was to enforce an arbitration provision and forum selection clause in the parties’ Dispute Resolution Agreement. They wanted to transfer the entire case to the Eastern District of Texas, then compel each individual to go to arbitration. In the alternative, defendants asked the court to: (1) compel arbitration for the Opt-In Plaintiff Andrew Tyler because he is in South Carolina (and district courts may only compel arbitration within their own districts); (2) strike the collective claims; and (3) dismiss the claims asserted by the non-South Carolina opt-in plaintiffs so they could pursue their claims in arbitration.

Four of the five opt-in plaintiffs were also bound by arbitration agreements. Those agreements included a class/collective action waiver provision and required any disputes about the enforceability and validity of the agreement, except for the class action/collective action waiver provision, be determined by an arbitrator.

During the litigation, the plaintiffs challenged the class and collective action waiver provision as unenforceable based on Section 7 of the National Labor Relations Act and Lewis v. Epic System. Corp, 823 F.3d 1147 (7th Cir. 2016). But, as we have previously covered, the United States Supreme Court overturned the very same Seventh Circuit opinion in Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018).

The Supreme Court handed down its decision on May 21, 2018, after Brumfield filed his complaint, and after Kindred Healthcare filed its Motion to Compel Arbitration. Kindred received an enormous benefit from the U.S. Supreme Court in support of its Motion to Compel Arbitration, and this is the first South Carolina opinion enforcing the U.S. Supreme Court’s recent decision. Before Epic Sys. Corp. v. Lewis, the Fourth Circuit had not directly addressed this issue. (Although it has held that the availability of class arbitration under the terms of the arbitration agreement is a question for the Court, not the arbitrator, to decide.) With Epic Sys. Corp. v. Lewis, and now Judge Norton’s order in Brumfield v. Kindred Healthcare, Inc., South Carolina employers can require their employees adjudicate claims on an individual basis in arbitration to avoid an expensive class action or collective action lawsuit.