The Sixth Circuit earlier this week decided an issue recently left open by the United States Supreme Court as to whether the Court or an arbitrator is to decide whether classwide arbitration is available under an arbitration clause. In Reed Elsevier, Inc. v. Crockett, Case No. 12-3574 (Nov. 5, 2013) (pdf), the Court examined whether a determination of classwide arbitrability was a “gateway dispute,” which is reserved for judicial determination unless the parties clearly and unmistakably provide otherwise, or a “subsidiary question,” which grows out of the dispute and bears on its final disposition, and is thus reserved for the arbitrator once a court decides that the parties have agreed to resolve a particular dispute through arbitration.
Faced with a plurality determination in Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003) that classwide arbitrability was a subsidiary question, the Sixth Circuit recognized that the question remained an open one. The Sixth Circuit identified four reasons supporting its decision that a determination of whether the parties had agreed to classwide arbitration is a gateway decision, presumed to be reserved for the judiciary unless the parties clearly and unmistakably provide otherwise: 1) that the loss of arbitration’s putative benefits of lower costs and greater efficiencies in classwide arbitration should not be presumed by simply agreeing to submit disputes to an arbitrator; 2) confidentiality concerns in classwide arbitrations may frustrate parties’ assumptions when they agreed to arbitrate; 3) the commercial stakes at issue in class arbitration (here in excess of $500 million) are comparable to that of class litigation; and 4) due process concerns of absent classmembers can be better addressed through opt in proceedings in court. In sum, the Court recognized that whether the parties arbitrate one claim or 1,000 in a single proceeding is no mere detail, and thus is not a subsidiary question.
Turning to whether the arbitration clause before it “clearly and unmistakably” assigned to an arbitrator the question whether the agreement permitted classwide arbitration, the Court held that it did not as the arbitration clause did not mention classwide arbitration at all, much less mention who would decide the issue. After concluding that there was no clear and unmistakeable assignment to the arbitrator and thus the Court would decide whether class arbitration was available, the Sixth Circuit quickly disposed of the attorney’s arbitration request, holding that “the principal reason to conclude that this arbitration clause does not authorize classwide arbitration is that the clause nowhere mentions it.”