Seyfarth Synopsis: Complex class actions often present a scenario in which some or most of the putative class members are subject to arbitration agreements, but the named plaintiff is not. In Gembarski v. PartsSource, Inc., No. 2018-0125, 2019 Ohio LEXIS 1639 (Ohio Aug. 14, 2019), the Supreme Court of Ohio concluded that because the defendant could not have raised an arbitration defense against the named plaintiff prior to class certification, such a defense did not have to be raised in the Answer. For this reason the defendant was not precluded from raising arbitration as a defense to class certification for putative class members.

Background

In Gembarski v. PartsSource, Inc., No. 2018-0125, 2019 Ohio LEXIS 1639 at 2 (Ohio Aug. 14, 2019), Plaintiff filed a class action complaint against his employer, PartsSource, alleging that the company improperly withheld commissions that he and other putative class members earned while working as account managers. PartsSource filed an answer to the complaint, denying any wrong-doing and denying that the suit could be maintained as a class action. Id. at 4.

Eventually, Plaintiff filed a motion to certify the case as a class action and PartsSource opposed the motion. Specifically, PartsSource argued that Plaintiff could not meet the typicality or adequacy requirements for class certification because, unlike members of the putative class, Plaintiff did not sign an arbitration agreement agreeing to arbitrate claims on an individual basis. PartsSource argued that Plaintiff’s interests were divergent from those putative members who were subject to an arbitration defense. Id. at 5-6.

Plaintiff, however, argued that PartsSource had waived its arbitration defense because PartsSource had not asserted an “arbitration defense” in its answer prior to raising it at the class certification stage. Id. at *7. PartsSource countered that it never had a right to demand arbitration from Plaintiff and contended that it would have been premature to raise any argument related to arbitration prior to the class certification phase of the litigation. Id.

The Decision

The Ohio Supreme Court ultimately agreed with PartsSource, holding that, when a case originates with a single named plaintiff and that plaintiff is not subject to an arbitration agreement that was agreed to by unnamed putative class members, the defendant need not raise a specific argument relating to arbitration in the defendant’s answer.

The Supreme Court explained that “[a]rbitration as a defense to an action is a concept that is separate from arbitration as an attack on a plaintiff’s” satisfaction of the requirement to certify a class. Id. at 12. Because PartsSource had no duty to raise with specificity a class certification argument in its Answer, such an argument was not waived by failing to raise it at that time. The appropriate time to raise such an argument was precisely when PartsSource did so: at the certification stage. Id. at 21.

Implication For Employers

The decision in Gembarski gives employers more time to investigate and contemplate unique defenses to class certification. However, the best practice for employers battling class actions is to raise arbitration as a defense in an answer, as that will altogether preclude plaintiffs from asserting a waiver argument. Outside of the potential for waiver, employers must be sure to investigate every potential avenue for defeating the class as early as possible in the case. Arbitration defenses and other similar defenses that can defeat class certification should be developed and flagged early in every class action.