Commercial Litigation and Arbitration

Adoption of Arbitral Rules That Grant Arbitrator the Power to Determine Arbitrability Evinces Parties’ Binding Agreement to Forgo Judicial Resolution — So, Too, Does Use of Broad Arbitration Clause

Wynn Resorts, Ltd. v. Atlantic-Pacific Capital, Inc., 2012 U.S. App. LEXIS 23312 (9th Cir. Nov. 13, 2012):

1. Responsibility for Deciding the Arbitrability Issue

"The question whether the parties have submitted a particular dispute to arbitration, i.e., the 'question of arbitrability,' is 'an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.'" Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (quoting AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986)). In evaluating whether the parties so intended to provide, courts apply ordinary state-law contract principles. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).

Under New York law, an agreement's incorporation of arbitral rules that expressly confer upon arbitrators the power to decide the issue of arbitrability demonstrates a clear and unmistakable intent by the parties to proceed accordingly. See, e.g., Shaw Grp. Inc. v. Triplefine Int'l Corp., 322 F.3d 115, 122 (2d Cir. 2003) ("parties' intent to arbitrate arbitrability [wa]s further evidenced [under New York law] by their agreement to refer all disputes to the 'International Chamber of Commerce . . . in accordance with the rules and procedures of International Arbitration,'" which required that the arbitral body address questions of arbitrability); PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 1202 (2d Cir. 1996) (same as to National Association of Securities Dealers' rules).

The agreement here incorporated the JAMS arbitration rules, stating, "[e]xcept as otherwise provided herein, arbitration shall be conducted pursuant to and in accordance with J.A.M.S.' [sic] Streamlined Arbitration Rules and Procedures in effect at the time of the filing of the demand for arbitration." JAMS Rule 8(c) provides that an arbitrator shall decide the issue of arbitrability:

Jurisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought, and who are proper Parties to the Arbitration, shall be submitted to and ruled on by the Arbitrator. The Arbitrator has the authority to determine jurisdiction and arbitrability issues as a preliminary matter.

(emphasis added). By incorporating the JAMS rules, the parties demonstrated their clear and unmistakable intent to have an arbitrator resolve the issue of arbitrability. Gibson v. Seabury Transp. Advisor LLC, 936 N.Y.S.2d 539, 539 (App. Div. 2012) (intent to allow arbitrator to decide issue of arbitrability demonstrated by parties' incorporation of JAMS/Endispute's commercial rules).

The inclusion of a broad arbitration provision also evinces the parties' intent to have an arbitrator decide the question of arbitrability under New York law. See, e.g., Shaw Grp. Inc., 322 F.3d at 121 ("a 'broad grant of power to the arbitrators' . . . evidence[s] the parties' clear 'inten[t] to arbitrate issues of arbitrability'" (quoting PaineWebber, 81 F.3d at 1199-1200)). The arbitration provision here is worded broadly, providing that "[a]ny dispute, controversy or claim arising from or relating to this Agreement shall be submitted to and determined by binding arbitration . . . ." This language is similar to language found to demonstrate an intent [*6] to arbitrate arbitrability. See, e.g., id. (provision that stated "[a]ll disputes . . . concerning or arising out of" contract shall be subject to arbitration demonstrated parties "clearly and unmistakably" agreed to have arbitrator decide arbitrability); Smith Barney Shearson Inc. v. Sacharow, 689 N.E.2d 884, 885, 887-88 (N.Y. 1997) (agreement stating that "any controversy" between the parties would be "settled by arbitration" was sufficiently "plain and sweeping" to indicate an intent to have arbitrator resolve issue of arbitrability).

Thus, the parties' incorporation of the JAMS rules and their employment of a broad arbitration provision establish their clear and unmistakable intent to submit the issue of arbitrability to arbitration.

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