11th Circuit Decides Class Action and Arbitration Case
On September 19, 2018, the U.S. Court of Appeals for the Eleventh Circuit decided that the availability of a class is a question of arbitrability presumptively to be decided by a court and not an arbitrator, unless there is clear and unmistakable intent of the contracting parties to send the question to arbitration. The decision is particularly significant because this issue is of first impression to the Eleventh Circuit and has been expressly left open by the U.S. Supreme Court.
The plaintiffs in the case filed a demand for arbitration with the American Arbitration Association (AAA) against a Miami-based company that provides fee-for-service amenities in prisons across the nation. The plaintiffs sought to compel a class action arbitration alleging the company violated Florida’s consumer protection laws. The company asked the district court to stop the class proceeding and force the plaintiffs to arbitrate their claims separately. The district court granted summary judgment in favor of the company, holding that the availability of class arbitration was a question which was presumptively for a court to decide, that nothing in the terms of the arbitration agreement rebutted the presumption, and that class arbitration was not available under the terms of the agreement.
The Eleventh Circuit agreed with the district court’s decision that there is a presumption that the issue of class availability should be decided by a court. The Court reasoned that this issue falls within the category of questions “about whether an arbitration clause in a concededly binding contract applies to a particular type of controversy,” a type of question the U.S Supreme Court has held is presumptively for the courts to decide. The Eleven Circuit further explained that because the availability of a class is a gateway question defining what type of proceeding will decide each parties’ rights and obligations, it is unlike procedural questions usually left for arbitrators. Given the consequential impact of the answer to this question, the Court found it should be assumed that parties contracting to arbitrate their disputes would still expect a court to decide whether class arbitration is available.
Nonetheless, the Court held in this case that class availability should be decided by the arbitrator because the arbitration agreement showed clear and unmistakable intent of the contracting parties to have the question decided in arbitration. The Court first noted that the agreement references the AAA rules three times and says all disputes would be resolved through such rules. Precedent holds that incorporation of AAA rules like the one found here amounts to clear and unmistakable delegation of questions of arbitrability to an arbitrator. But if that was not enough, the Court pointed out the agreement governs any dispute, claim, or controversy and states that the ability to arbitrate any of these is to be determined in arbitration. Given this language, the Court concluded the contracting parties showed the “clearest possible” intent to delegate questions of arbitrability to an arbitrator.
The full text of the opinion may be found here.
