Within one week of each other, United States Courts of Appeals in two circuits have issued opinions holding that arbitration agreements incorporating the American Arbitration Association (AAA)'s arbitration rules itself demonstrates "clear and unmistakable" evidence of the parties' intent to delegate the question of arbitrability to the arbitrator, even when the arbitration involves class claims.
In Spirit Airlines, Inc. v. Maizes, No. 17-14415 (11th Cir. Aug. 15, 2018), the Eleventh Circuit applied a prior case to mandate an arbitrator decide the arbitrability of a putative class dispute between members of Spirit Airlines' so-called "$9 Fare Club" and the airline relating to allegedly broken promises related to the club membership. When the class representatives filed a class arbitration claim against Spirit, the airline sued the class representatives in federal court seeking a declaration that the agreement's arbitration clause does not permit class arbitration claims. The Eleventh Circuit affirmed the district court's dismissal for lack of jurisdiction. The decision relied heavily upon a prior circuit decision—Terminix Int'l Co. v. Palmer Ranch Ltd. P'ship—which held that parties' choice of AAA Commercial Arbitration Rules constituted "clear and unmistakable" evidence they intended to submit the question of arbitrability to the arbitrator. Applying that reasoning to the present dispute, the court held the parties' choice of AAA rules, including the Supplementary Rules for Class Arbitrations, demonstrated "clear and unmistakable" intent to delegate arbitrability.
In doing so the court rejected Spirit's request for a higher burden where class arbitrability is concerned, as required in the Third, Fourth, Sixth, and Eighth Circuits. The court found those decisions did not align with its reading of Supreme Court precedent, distinguishing questions of whether an agreement allows class arbitration at all as separate and apart from the issue of who decides that question. Additionally, the court declined to read the arbitration clause's reference to Florida law as creating ambiguity in the agreement, instead reading the clause to mean that Florida law governs the parties' substantive rights while AAA rules govern arbitration procedures.
In DISH Network L.L.C. v. Ray, No. 17-1013 (10th Cir. Aug. 21, 2018), the Tenth Circuit applied circuit and Colorado law to conclude the question of class arbitrability rested with the arbitrator in a dispute between DISH Network and a former employee over alleged violations of federal and state employment laws and breach of contract. Originally filed as a putative class action in federal court, the former employee voluntarily dismissed his suit and re-filed the same claims in arbitration as a class action. The Tenth Circuit read the broad language in the parties' arbitration agreement and the inclusion of AAA rules on employment disputes to display clear and unmistakable intent to arbitrate arbitrability. Like the Eleventh Circuit in Spirit Airlines, the court refused to follow other circuits and require more specific language delegating arbitrability when class arbitration is at issue. Because the court concluded that the parties "clearly and unmistakably" evinced intent to delegate the question of arbitrability to the arbitrator, it was able to sidestep the distinction of whether the arbitration clause permits class-wide arbitration is a gateway issue for courts to decide or a procedural issue for the arbitrator to decide.
The Tenth Circuit also rejected DISH's petition to vacate based on its contention that the arbitrator manifestly disregarded the law in concluding he was authorized to conduct class arbitration. It noted that the arbitrator conducted an in-depth analysis of the arbitration contract and the court's review is extremely limited even where it may disagree with the arbitrator's ultimate conclusion.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.