Arbitration — Is It for the Court or Arbitrators to Decide Whether Claim Can Proceed as a Class Claim? — Circuit Split — Incorporation of AAA Rules Dictates Conclusion That Arbitrators Decide

III. Availability of Class Arbitration

Hedrick v. BNC Nat’l Bank, 2016 U.S. Dist. LEXIS 64679 (D. Kan. May 16, 2016):

Plaintiff argues that the question of whether his claim can proceed to arbitration as a class claim is a procedural question that the arbitrator, rather than the Court, should decide. Alternatively, Plaintiff argues that if the Court decides this question, it should determine that the claim can proceed to arbitration as a class claim. Defendant argues that the class arbitration issue is a substantive "question of arbitrability" that must be resolved by the Court, and that the Court should determine that the claim must proceed to arbitration as an individual claim.

To determine whether the class arbitration issue is a question for the Court or the arbitrator to decide, the Court must first determine whether the issue is substantive or procedural.22 Substantive "questions of arbitrability" include "certain gateway matters, such as whether parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type [*9]  of controversy."23 Unless the parties "clearly and unmistakably provide otherwise," questions of arbitrability are for the Court to decide.24 Procedural questions, which relate to whether the parties have satisfied conditions that allow them to use arbitration, are for the arbitrator to decide.25

22   Soc'y of Prof'l Eng'g Emps. in Aerospace v. Spirit Aerosystems, Inc., 541 F. App'x 817, 819 (10th Cir. 2013) ("We begin by determining whether the issue of arbitrability is substantive or procedural.").

23   Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2069 n.2 (2013) (quoting Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003) (plurality opinion)).

24   Spahr v. Secco, 330 F.3d 1266, 1269 (10th Cir. 2003).

25   Spirit Aerosystems, 541 F. App'x at 819 (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 85 (2002)).

In support of his argument that the class arbitration question is for the arbitrator to decide, Plaintiff cites In re Universal Service Fund Telephone Billing Practices Litigation,26 a District of Kansas case in which Judge Lungstrum held that the availability of class-wide arbitration was a question for the arbitrator, where the arbitration clause was silent on the issue.27 In so ruling, Judge Lungstrum relied on Green Tree Fin. Corp. v. Bazzle.28 In Bazzle,29 the United States Supreme Court addressed the question of who should decide the class arbitration issue in the context of a contract that did not address the issue.30 The Court held that because the class arbitration issue did not concern the validity of the arbitration clause or its applicability to the underlying [*10]  dispute between the parties, the issue did not fall within the "narrow exception" of gateway arbitration matters that a court, rather than an arbitrator, should resolve.31 Plaintiff contends that In re Universal and Bazzle demonstrate that the arbitrator should resolve the class arbitration issue.

26   300 F. Supp. 2d 1107 (D. Kan. 2003).

27   Id. at 1126-27.

28   Id.

29   539 U.S. 444 (2003).

30   Id. at 447-50.

31   Id. at 452-53.

Defendant relies on post-Bazzle authority in arguing that Bazzle did not resolve the question of who determines the availability of class arbitration. In Stolt-Nielsen S.A. v. AnimalFeeds International Corporation,32 issued several years after Bazzle, the Supreme Court suggested that Bazzle did not resolve the question of who decides the class arbitration issue.33 In Stolt-Nielsen, the Court addressed the question of whether "imposing class arbitration on parties whose arbitration clauses are 'silent' on that issue is consistent with the Federal Arbitration Act (FAA)."34 In dicta, the Court also discussed the impact of Bazzle on the question of who decides the class arbitration issue, explaining that: Unfortunately, the opinions in Bazzle appear to have baffled the parties in this case at the time of the arbitration proceeding. For one thing, the parties appear to have believed that the judgment [*11]  in Bazzle requires an arbitrator, not a court, to decide whether a contract permits class arbitration . . . In fact, however, only the plurality decided that question.35 Ultimately, the Court held that it did not need to address the "who decides" question because the parties' agreement expressly assigned that issue to the arbitration panel36

32   559 U.S. 662 (2010).

33   Id. at 680; see Maureen A. Weston, The Death of Class Arbitration After Concepcion?, 60 U. Kan. L. Rev. 767, 775-76 (2012) ("In 2010, the Court's sentiment toward class arbitration appeared to take a sharp turn in Stolt-Nielsen").

34   Stolt-Nielsen, 559 U.S. at 666.

35   Id. at 680.

36   Id.

Three years after Stolt-Nielsen, the Court addressed the validity of an arbitrator's decision to allow class arbitration in Oxford Health Plans LLC v. Sutter.37 The Court again explained that it was not in a position to determine the "who decides" issue because the parties agreed that the arbitrator should determine whether the contract authorized class arbitration.38 However, the Court clarified its stance on the issue, explaining that "Stolt-Nielsen made clear that this Court has not yet decided whether the availability of class arbitration is a question of arbitrability."39 Thus, Defendant is correct in arguing that the Supreme Court has not yet resolved the "who decides" [*12]  issue.40

37   133 S. Ct. 2064 (2013).

38   Id. at 2068 n.2.

39   Id.

40   See Opalinski v. Robert Half Int'l Inc., 761 F.3d 326, 335 (3d Cir. 2014) cert. denied, 135 S. Ct. 1530 (2015) (noting that Supreme Court has not resolved the question of who decides the availability of class arbitration); see also S. Commc'ns Servs., Inc. v. Thomas, 720 F.3d 1352, 1359 (11th Cir. 2013) (same).

In the absence of controlling Supreme Court precedent, a split of authority has developed regarding the "who decides" question. Like the Supreme Court, the Tenth Circuit has not directly addressed the question of who determines the availability of class arbitration. It has, however, held in an unpublished decision that the determination of whether a collective-bargaining agreement creates a duty for the parties to arbitrate class-wide disputes is a substantive "question of arbitrability" for the courts.41 Two circuits—the Third and Sixth—have directly addressed the question of who decides class arbitrability since the Supreme Court's post-Bazzle decisions, and both have held that it is a question of arbitrability for the courts.42 The Fifth Circuit recently affirmed a decision that it issued before Stolt-Nielsen and Sutter, in which it relied on Bazzle in holding that the availability of class arbitration is a question for the arbitrator.43 The court explained that although Stolt-Nielsen and Sutter clarified that Bazzle [*13]  does not control on the issue of who determines the availability of class arbitration, these cases do not represent an intervening change in law requiring the Fifth Circuit to revisit its earlier decision.44 The remaining circuit courts have not directly addressed the issue.45 Some district courts have held that the "who decides" question is for the court, while others have held that it is for the arbitrator to decide.46

41   Soc'y of Prof'l Eng'g Emps. in Aerospace v. Spirit Aerosystems, Inc., 541 F. App'x 817, 819 (10th Cir. 2013)

42   Opalinksi, 761 F.3d at 332; Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594, 598-99 (6th Cir. 2013).

43   Robinson v. J&K Admin. Mgmt. Servs., Inc., 817 F.3d 193, 195-97 (5th Cir. 2016).

44   Id.

45   Harrison v. Legal Helpers Debt Resolution, LLC, No. CIV. 12-2145 ADM/TNL, 2014 WL 4185814, at *4 (D. Minn. Aug. 22, 2014).

46   Id. (summarizing cases in which courts have held that availability of class arbitration is for arbitrator to determine); Chesapeake Appalachia, LLC v. Suppa, 91 F. Supp. 3d 853, 858-61 (N.D.W. Va. 2015) (holding that availability of class-wide arbitration is a judicial determination for the court).

As the Supreme Court has suggested, there are "fundamental" differences between bilateral and class-wide arbitration, including the cost, efficiency, and speed of resolving the dispute.47 These fundamental differences presumably create gateway issues of arbitrability that should be resolved by the Court, rather than the arbitrator.48 However, even assuming that the availability of class arbitration is a "question of arbitrability," the Court finds that the arbitrator must determine this question [*14]  because the Employment Agreement provides "clear and unmistakable evidence" that the parties intended the arbitrator to determine questions of arbitrability.

47   Stolt-Nielsen, 559 U.S. at 685-86; AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 348 (2011).

48   See Opalinski, 761 F.3d at 335.

Here, the arbitration clause provides that arbitration will "be administered by the American Arbitration Association (the 'AAA') under its National Rules for the Resolution of Employment Disputes as in effect at the time of the claim or controversy (the 'Rules')."49 These Rules state that "The Arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement."50 Thus, pursuant to the arbitration clause, the arbitrator must determine whether class arbitration falls within the scope of the clause. Further, this District has held that the incorporation of the Rules provides "clear and unmistakable evidence" that the parties intended to delegate questions of arbitrability to the arbitrator.51 Additionally, the seven circuits that have addressed the issue have held that the incorporation of the AAA's Commercial Arbitration Rules—which contain language identical to Rule 6(a) of the Employment Arbitration Rules—in an arbitration [*15]  clause constitutes "clear and unmistakable evidence" that the parties agreed to arbitrate questions of arbitrability.52 Thus, the parties' incorporation of the Rules into the arbitration clause constitutes a "clear and unmistakable" delegation of questions of arbitrability to the arbitrator. Accordingly, the Court finds that the arbitrator must decide the question of whether the arbitration clause allows for class arbitration.

49   Doc. 7-1 at 3.

50   Rule 6(a), AAA Employment Arbitration Rules and Mediation Procedures (available at www.adr.org) (last visited May 12, 2016). "The National Rules for the Resolution of Employment Disputes have been re-named the Employment Arbitration Rules and Mediation Procedures. Any arbitration agreements providing for arbitration under its National Rules for the Resolution of Employment Disputes shall be administered pursuant to these Employment Arbitration and Mediation Procedures." Id. Rule 1.

51   Seahorn v. JC Penney Corp., No. 12-CV-2617-CM, 2013 WL 452793, at *1 (D. Kan. Feb. 6, 2013) (citing Nazar v. Wolpoff & Abramson, LLP, No. 07-2025-JWL, 2007 WL 528753, at *4 (D.Kan. Feb. 15, 2007)); Chen v. Dillard's Inc., Nos. 12-CV-2366-CM, 12-CV-2517-JTM, 2012 WL 4127958, at *2 n.1 (D. Kan. Sept. 19, 2012).

52   See, e.g., Contec Corp. v. Remote Solution, Co., 398 F.3d 205, 208 (2d Cir. 2005) (holding that incorporation of AAA Commercial Arbitration Rules served as clear and unmistakable evidence of parties' intent to delegate questions of arbitratbility [*16]  to arbitrator); U.S. ex rel. Beauchamp v. Academi Training Ctr., Inc., No. 1:11CV371, 2013 WL 1332028, at *5 (E.D. Va. Mar. 29, 2013) (collecting cases).

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