Usually the plaintiffs in a class action want to stay out of arbitration, but in the recent case of JPAY v. Kobel, 2018 WL 4472207 (11th Cir. Sept. 19, 2018), it was the class representatives who were fighting for arbitration. In particular, they wanted the arbitrator to decide whether they could have a class action. And they won.
In a case that reads as if it is charting significant new ground, even though the court reached almost the same conclusion just a few weeks ago, the Eleventh Circuit clarified a few holdings. First, the availability of class arbitration is a “gateway issue” that is presumptively for courts to decide. [To be fair, in the earlier decision, it had assumed that result without actually reaching that holding.] Second, the availability of class arbitration can be delegated to arbitrators just as easily as other gateway questions. In other words, the 11th Circuit reaffirmed its opposition to the rule adopted by three other circuits: that the question of class arbitrability takes special delegation language, and incorporating JAMS or AAA rules is not enough.
In this case, the court found that the parties had delegated the question of whether the action could proceed on a class basis in arbitration in two independent ways. First, they had agreed to arbitrate under AAA rules (the agreement mentions both consumer and commercial rules). Because the AAA rules authorize arbitrators to determine their own jurisdiction, the 11th Circuit found this was sufficient to authorize the arbitrator to decide whether a class action was available under the language of the parties’ arbitration agreement. It disagreed that the parties needed to have adopted or referenced the AAA Supplementary Rules for Class Arbitrations.
Second, the parties had included this language in the arbitration clause: “the ability to arbitrate the dispute, claim or controversy shall likewise be determined in the arbitration.” The court found that was sufficient, even without the incorporation of AAA rules, to take the class arbitrability decision out of the court’s ambit.
The court also took on some of the public policy arguments made in favor of keeping class arbitrability in the courts. It said “[t]he arbitrator’s decision whether a class is available will be more efficient and more confidential than a court’s would be. The determination of class availability has the same stakes and involves the same parties whether it is decided in a court or in arbitration.” And while the arbitrator’s decision is “somewhat less reviewable than a court’s,….it will be no less reviewable than any other decision made in arbitration, and the law generally favors arbitration of many high-stakes questions.” This is one of the most respectful, positive statements I have seen about arbitration in a court decision in a long time. Curious though that the court did not address the frequent rebuttal to these arguments: that there could be financial incentive for an arbitrator or administrator to find a class can proceed.
The decision was not unanimous. The lone dissenter from the panel wrote that “without a specific reference to class arbitration the court should presume that the parties did not intend to delegate to an arbitrator an issue of such great consequence.”
I am taking bets on how quickly SCOTUS grants cert to decide this circuit split.