Commercial Litigation and Arbitration

“Arbitrability” vs. Scope of Arbitrators’ Authority — A Word in Use for 500 Years that Appears in Almost No Dictionaries

From Burlington Northern & Santa Fe Railway Co. v. Public Serv. Co. of Okla., 2010 U.S. App. LEXIS 25252 (10th Cir. Dec. 10, 2010):

As an initial matter, we must clarify the distinction between arbitrability and the scope of an arbitrator's authority, because different standards of review apply to each. An issue is arbitrable if it is subject to decision by arbitration or referable to an arbitrator or arbiter. Webster's Third New Int'l Dictionary, Unabridged 110 (2002). Here, the arbitrable issue is whether the rate for single-line service can fall below $11.77 per ton. In contrast, the scope of authority question is whether the board, in determining whether the rate can fall below $11.77 per ton, had the authority to declare no rate floor provision existed.

[Footnote 2] Courts commonly use "arbitrability" to refer to the quality or state of being arbitrable. See, e.g., Texoma Natural Gas Co. v. Oil Workers Int'l Union, 58 F. Supp. 132, 148 (D. Tex. 1943). However, arbitrability is not defined in Black's Law Dictionary, the Oxford English Dictionary, or Webster's Third New International Dictionary, Unabridged, even though the word arbitrable can be traced back nearly five hundred years. See Oxford English Dictionary at 601-02 (2d ed. 1989).

So long as the parties have not specifically agreed to submit the arbitrability question itself to arbitration (i.e., to arbitrate arbitrability), a court will decide independently whether the merits of the parties' dispute is arbitrable. First Options of Chicago v. Kaplan, 514 U.S. 938, 943 (1995). Thus, "a party who has not agreed to arbitrate will normally have a right to a court's decision about the merits of its dispute." Id. at 942.

But once a court independently determines the parties agreed to arbitrate an issue, it should give "extreme deference" to an arbitrator's decision regarding the scope of that issue. See Sheldon, 269 F.3d at 1206. Other circuits have expressly held "the arbitrator's interpretation of the scope of his powers is entitled to the same level of deference as his determination on the merits." See Schoenduve Corp. v. Lucent Techs., Inc., 442 F.3d 727, 733 (9th Cir. 2006); Major League Umpires Ass'n v. Am. League of Prof. Baseball Clubs, 357 F.3d 272, 279 (3d Cir. 2004). ***

2. Scope of Authority

To determine whether a particular dispute falls within the scope of an agreement's arbitration clause, we follow the three-part inquiry enunciated in Cummings v. FedEx:

First, recognizing there is some range in the breadth of arbitration clauses, a court should classify the particular clause as either broad or narrow. Next, if reviewing a narrow clause, the court must determine whether the dispute is over an issue that is on its face within the purview of the clause, or over a collateral issue that is somehow connected to the main agreement that contains the arbitration clause. Where the arbitration clause is narrow, a collateral matter will generally be ruled beyond its purview. Where the arbitration clause is broad, there arises a presumption of arbitrability and arbitration of even a collateral matter will be ordered if the claim alleged implicates issues of contract construction or the parties' rights and obligations under it.

404 F.3d 1258, 1261 (10th Cir. 2005) (quoting Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218, 224 (2d Cir. 2001) (emphasis, internal citations, and quotations omitted).

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